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follow the underwriting, rating, instructions, and procedures
outlined by Western General. Each petitioner further agreed to
report to Western General every 10 days the EWA’s sold during the
preceding 10 days and to remit “the insurance premium as provided
in * * * [Western General’s] rate chart/manual”.5
Each EWA sold to a customer included an individual Motor
Vehicle Policy of Mechanical Insurance (Vehicle Policy) naming a
petitioner as the insured and listing a covered vehicle, EWA
purchaser, and (multiyear) coverage period corresponding to the
EWA. A Vehicle Policy provides that the premium “shall become
fully earned” by Western General upon inception of the coverage;
however, the Vehicle Policy subsequently provides exceptions
under which a pro rata refund of the premium will be made,
including an election by the insured (i.e., each petitioner) to
cancel within 90 days after inception or the repossession of the
covered vehicle.
Petitioners were not affiliated with or related to Western
General in any way.
Once a petitioner remitted the premium to Western General,
the risk of loss on the related EWA passed entirely to Western
General. Upon payment of the premium, Western General was solely
responsible to the vehicle purchaser for the cost of repairs
5 The parties have stipulated that petitioners in fact made
all such payments to Western General within 60 days after an EWA
was purchased by one of petitioners’ customers.
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Last modified: May 25, 2011